By Kim Soo-yeon SEOUL, Oct. 8 (Yonhap) -- Simmering currency wars among the world's major economies are feared to add upward pressure on the Korean currency, raising concerns over the erosion of its export competitiveness and a potential sudden reversal of capital inflows, analysts say.

The currency dispute has taken a new twist after Japan stepped in the currency market on Sept. 15 for the first time in more than six years in a bid to tame the yen's ascent against the U.S. dollar that is threatening to crimp its fragile recovery.

The U.S. and Europe are also ratcheting up their calls for China to allow its currency to appreciate fast, claiming that what they see as an undervalued yuan is giving an unfair export advantage to China, hurting balanced global growth.

Some emerging economies did not hesitate to join efforts to curb their currencies' gains. On Monday, Brazil doubled a tax on purchases of local bonds by foreigners to 4 percent.

Drives by major economies to push down the value of their currencies come as the faltering growth and stubbornly high unemployment rates are luring them into relying more on exports as a way to boost the growth, experts said.

"Currency dispute has heightened as talks about additional quantitative easing by the U.S. Federal Reserve have been pounding the value of the greenback," said Jeon Seung-ji, a currency analyst at Samsung Futures Co.

The Bank of Japan on Tuesday cut its overnight rate target to a near zero and pledged for asset purchases worth 5 trillion yen (US$60 billion). Still-languish job data and Japan's rate cut are upping prospects that the Fed is set to start another round of quantitative easing.

Analysts said amid global currency tensions, the Korean won is projected to be under upward pressure, with some betting that the unit may rise to the 1,100 level to the greenback within this year. The local currency hit a five-month high of 1,114.50 won to the dollar on Thursday before weakening to 1,120.30 won on Friday.

The Korean currency has climbed about 4 percent to the dollar so far this year amid brisk exports and sustained inflows of stock and bond funds. In September alone, the won gained more than 5 percent against the dollar.

"Hopes for U.S. stimulus easing are weakening the dollar, and China's effort to diversify its foreign exchange reserves is seen by some market watchers as an intention to add upward pressure on currencies of its neighboring countries," said Jeong Young-sik, an economist at Samsung Economic Research Institute.

"But South Korea, the host of the G-20 summit in November, is in a dilemma as it could not explicitly cap the won's gain."

Economists said the local currency's ascent is feared to hurt the country's export-driven economy, and there remain concerns that massive dollar inflows could be reversed when any emergency crops up.

"South Korea suffered from excessive capital outflows in the height of the global financial crisis even though the cause was not originated from the country," Jeong said.

"To prevent the short-term money inflows from strengthening the won, there should be further thorough monitoring against capital flows moving in and out of the country."

Analysts also said policymakers at the Bank of Korea (BOK), South Korea's central bank, would be in hot water at the monthly rate-setting session slated for Thursday because a potential rate hike would put further upward pressure on the won's gain.

The BOK took a pause for the second straight month in September on the global recovery woes. But the country's consumer prices shot up 3.6 percent in September from a year ago, indicating a buildup in inflationary pressure.

A widening rate gap with other countries invites more foreign capital inflows in search of higher returns and gives strength to the currency, according to analysts.